A big legal battle has been brewing between upstart video streamer VidAngel and Hollywood heavyweights Disney, Warner Bros., and 20th Century Fox. So far, the studios have scored a clean knockdown, if not a knockout.

VidAngel describes itself as a family-friendly video streamer that allows users the ability to filter language, nudity and violence from movies and TV shows. Its business model involves selling new movies to customers for $20, allowing customers to select which snippets of content to edit out, and then buying movies back for $19. The price VidAngel will pay to buy back the content diminishes by a dollar for each day the buyer keeps it. In other words, VidAngel does not license the movies from the studios who hold the copyrights to the content like, for example, Netflix does.

The big studios took notice, and in June filed suit, alleging that VidAngel was operating as an “unlicensed [video on demand] streaming service.” Among other claims, the studios requested that the court grant an injunction blocking VidAngel from continuing to stream films. VidAngel fired back with counterclaims alleging antitrust violations by the studios.

In December, a federal district court judge ruled in the plaintiffs’ favor and issued a preliminary injunction against VidAngel pending the outcome of the copyright-infringement trial. “VidAngel has not offered any evidence that the Plaintiffs have either explicitly or implicitly authorized DVD buyers to circumvent encryption technology in order to view the DVD on a different platform such as VidAngel’s streaming service,” wrote Judge Andre Birotte Jr. of the United States District Court for the Central District of California.

In early January, the U.S. Court of Appeals for the Ninth Circuit declined to grant VidAngel’s request for an emergency stay of the injunction.

The ongoing legal battle relates to the tension between different federal laws: The Family Movies Act (“FMA”), which allows individuals to filter what they deem to be unacceptably violent, profane or other content from films, and the copyright protections provided under the Digital Millennium Copyright Act DMCA and the Copyright Act.

The fact that the district court granted the preliminary injunction does not bode well for VidAngel’s chances at trial, as it required a finding of “strong likelihood of success” on the merits of the studios’ DMCA and Copyright Act claims.

VidAngel believes that its service is authorized under the FMA, which became federal law in 2005. The FMA requires that the movie at issue has to be an “authorized copy” and the filtering must be done by “a member of the private household.”

The studios believe that VidAngel’s actions are a clear case of copyright infringement, and explained in a joint statement that VidAngel is “trying to undercut legitimate services like Netflix, Hulu, and iTunes that license movies and TV shows from the copyright owners.” The studios went on to say that they “are not challenging legal uses of the Family Movie Act.” The studios alleged that VidAngel violated their rights pursuant to §1201(a) of the DMCA and under §106 of the Copyright Act.

The DMCA provides that “no person shall circumvent a technological measure that effectively controls access to a work protected under this title.” In granting the injunction, the court rejected VidAngel’s argument that its actions in decrypting the movies/DVDs amounted to “space shifting” (allowing the content to be viewed in another way) and that the DMCA exempted shape-shifting.

The court stated that the DMCA only exempts from liability those “who would ‘decrypt’ an encrypted DVD with the authority of a copyright owner, not those who would ‘view’ a DVD with the authority of a copyright owner.” According to the court, the purchase of a DVD only grants the owner the authority to view the DVD, not to decrypt it.

The court also rejected all of VidAngel’s FMA arguments, including that the FMA provides an exemption to the anti-circumvention provisions of the DMCA. It explained that neither the language nor legislative history of the FMA supports VidAngel’s position on this issue. Regarding the FMA, the court wrote that the statute “clearly requires that a performance or transmission of filtered content must come from an ‘authorized copy’ of the motion picture. The digital content that VidAngel streams to its customers is not from an authorized copy.”

Finally, the court sided with the studios regarding their claims that VidAngel violated their exclusive rights, specifically their rights to reproduce their works by making copies and the right to publicly perform their copyrighted works, under the Copyright Act.

VidAngel has continuously argued that if a court agrees with the studios, then the FMA is largely ineffective to accomplish its purpose.

Regardless of the outcome of the dispute, VidAngel’s marketing team has put together its own summary of the legal issues. Check out some of VidAngel’s content below.

If nothing else, continuation of the dispute allows VidAngel to create (very) entertaining videos. A few well-placed jabs in the video above aim to solicit public sympathy toward VidAngel’s plight.

We will continue to keep you updated as this case develops. VidAngel suspended its service following the granting of the injunction, although it has vowed to fight on in the courts. Furthermore, VidAngel has anticipated this fight and built a legal fund to keep up the fight, as it recently raised a little over $10 million in a public offering. If you have any questions about this case or other entertainment issues in general, please contact John Mashni.

John brings a unique perspective to Foster Swift with his practical experience as an entrepreneur, business owner, and manager. He focuses in the areas of business, tax, intellectual property and entertainment.